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Housing Starts, Permits Tumble Driven By Collapse In Multi-Family Units

Tyler Durden's picture




 

One look at the August housing starts and permits data, and one will wonder just how is it possible that yesterday NAHB homebuilder confidence rose to a 9 year high, when according to the US Department of Commerce both Housing Start and Permits tumbled in the past month, with the housing "leading indicator" that is Permits sliding 5.6% from 1040K to 998K, and declining sequentially in every region of the US, with double digit drops in the Northeast and the Midwest, while Housing Starts tumbled by 14.4% from 1117K, to only 956K, wildly missing Wall Street expectations of "only" a 5.2% drop to 1037K.

But while single-family units remained roughly flat in their depressed state, which hasn't moved much if at all since the start of 2013 (as can be seen on the chart below), it was multi-family units that were the most volatile on the margin once again, dropping from 396K to 343K, or 13.4% for permits, and a whopping 31.5% for starts.

How these moves look visually:

While one can doubt the veracity of such volatile data, one thing is clear: Wall Street is having trouble with clearing multi-family housing, which also means that builders are confused whether to start new multi-family units or just dump the whole theme, now that the PE firms are leaving the own-to-rent business entirely

 

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Thu, 09/18/2014 - 08:53 | 5229493 Kaiser Sousa
Kaiser Sousa's picture

prediction....
the markets will rally upon opening followed by a ramp goin into the London close...
and......................
THE PHONY PAPER PRICES OF GOLD AND SILVER WILL FALLL...

thanks for listening..

Thu, 09/18/2014 - 08:56 | 5229498 GetZeeGold
GetZeeGold's picture

 

 

It's hard for a family to afford a new home.....even when both partners are working 29.5 hr/wk jobs.

 

Apparently it's great for equities however.

Thu, 09/18/2014 - 10:05 | 5229779 BKbroiler
BKbroiler's picture

The WTO agreement opened the gates to this hell.  Now John and Jane are competing with Chang and Mei-Lin and losing handily.   Comfy middle class jobs are a thing of the past, now it's just robots, hedgefunders, and asians.

Thu, 09/18/2014 - 11:59 | 5230333 KnuckleDragger-X
KnuckleDragger-X's picture

Working 29.5 hours plus being way over-leveraged on their college "education" and their various vices. Everybody dug themselves into a very deep hole and the government supplied the shovels.

Thu, 09/18/2014 - 09:36 | 5229667 gatorengineer
gatorengineer's picture

Kaiser way out on a limb with that prediction /s

Thu, 09/18/2014 - 09:53 | 5229739 Dr Strangemember
Dr Strangemember's picture

Well I don't know about all those confusing numbers and lines... but I DO KNOW that today is the best day to buy real estate!  Yep!  - NAR 

Thu, 09/18/2014 - 10:18 | 5229825 Kaiser Sousa
Kaiser Sousa's picture

Gator...
"thats why im richer than you..."
i take big risks....

do i need to add the sarc thingamagigga...

Thu, 09/18/2014 - 08:54 | 5229494 Bangalore Equit...
Bangalore Equity Trader's picture

Listen. I always wanted to see a "COLLAPSE" on the charts.

Now that I've seen it all I can say is "WOW"!

Thu, 09/18/2014 - 08:56 | 5229502 NoPension
NoPension's picture

Goddammit. We are trying to get a permit on a 105 unit project. Please don't let the party end yet.
Day late..dollar short..

Northeast, by the way.

Thu, 09/18/2014 - 09:35 | 5229664 LibertyBear
LibertyBear's picture

Nice cash flow!

Thu, 09/18/2014 - 08:59 | 5229503 ekm1
ekm1's picture

People have forgotten the concept of ................PROFIT.

 

If suppliers of construction materials make little or no profit, then they will reduce supplies

 

This is what is happening.

 

Supply chains are breaking down. Supplies are shrinking

 

NO PROFIT = NO OUTPUT

Thu, 09/18/2014 - 09:01 | 5229520 roadhazard
roadhazard's picture

Construction material prices are THROUGH THE ROOF. I do not know how anyone can build and make a dime. I am so glad I am out of the business.

Thu, 09/18/2014 - 09:04 | 5229538 ekm1
ekm1's picture

And they are not.

Government is simply guaranteeing profit to the banks, but still people have no cash flow to even get low interest mortgages.

 

QE money has gone to COSTS of doing business, hence businesses close down, supply chains break down

Thu, 09/18/2014 - 09:14 | 5229569 Bangalore Equit...
Bangalore Equity Trader's picture

Listen. It's a shame that the "CONSTRUCTION" worker gets injured on-the-job and then "HAS" to collect unemployment, and disability "BENEFITS" from the USSA government.

{Do you get it?}

I hear some then go on to work off-the-books, cash, and clean up. Horrible.

Thu, 09/18/2014 - 12:07 | 5230365 Majestic12
Majestic12's picture

"go on to work off-the-books, cash, and clean up. Horrible."

You are full of shit, Troll!

As an ex "Union-Carpenter"...the big fucking "myth" of a decent wage is slaughtered by the "seasonal" work and division of labor specialization.

The average construction worker (as a result) earns an "ANNUAL" wage of slightly above minimum for the year...

In other words, unless you are a "CONTRACTOR", its a part-time fucking gig!

And, Troll from outside the U.S., you cannot collect "BOTH" unemployment and disability....duh!

Now go eat some more shit to wash down with your silverspoon Koolaid...

Thu, 09/18/2014 - 09:28 | 5229624 Martian Moon
Martian Moon's picture

Got to disagree with you there

I can get a lot of materials at lower prices then during the spike in construction preceding 2008

What has gone up by an order of magnitude are permit fees, union fees, fees and taxes of all sorts with new and exotic names

Thu, 09/18/2014 - 11:52 | 5230311 IREN Colorado
IREN Colorado's picture

This is a regional phenom. Here in Colorado allot of our supply chains collapsed in 2008 so there are fewer players with less capacity to hold materials inventory. As a result our material costs are above 2007-2008 levels. Add to that the 25% or so increase in straight energy cost and you have a toxic brew for the construction industry. 

In response, the industry has become more involved in multi unit housing with special Government programs that "guarantee" a return on investment, utilize special financing, place section 8 sheeples in the apartments, all backed by Barry Hussein and the taxpayers. Also, this has been fantastic for the "dreamers" who will work for $8.00/hour 25 hours a week, get their Colorado drivers licenses, an debit card they can use at the pot shop, and immunity from prosecution when they drive their uninsured SUV into a school bus.

Gotta Love the new "Rocky Mountain High"

Thu, 09/18/2014 - 12:15 | 5230388 Majestic12
Majestic12's picture

"I can get a lot of materials at lower prices then during the spike in construction preceding 2008"

Yeah, what state are you building in....???

Are you building "modular" trailer shit?

I just spec'd a custom on Shelter Island (Hamptons)...the crap available is 5 times the price of quality Canadian or European materials...without the toxicity or short life span.

The construction industry, like real estate is full of wannabe "MIDDLEMEN" who add nothing but inflation to an already-substandard, dying industry.

Houses built in Europe last 300 years....here...30-40 tops.

Amerikkka, Number-Fuckin'-One, Yeah!!!!!

Thu, 09/18/2014 - 09:03 | 5229529 TideFighter
TideFighter's picture

Noticed that many multi-unit designs now have 3 and 4 bedrooms. Making room for the twenty-somethings coming back home and the seventy-somethings that can't afford their home any more. 

Thu, 09/18/2014 - 09:44 | 5229697 Bangalore Equit...
Bangalore Equity Trader's picture

Listen. Sounds like America's getting back to it's original family formation.

Won't be long now.

"My grandfather traveled on a camel, my father traveled on a train, I traveled in a car, my son travels on a jet, his son will travel on a camel."

Long saddles.

Thu, 09/18/2014 - 09:03 | 5229532 jubber
jubber's picture

Liesman said these figures were fantastic

Thu, 09/18/2014 - 09:04 | 5229535 Ness.
Ness.'s picture

Equity futures rallying on this great news.

 

 

Thu, 09/18/2014 - 09:06 | 5229539 farragut
farragut's picture

Tony Sanders, an Econ prof at George Mason University, has been following the housing markets for years. He's been a very vocal and critical observer of the toxic cocktail that is housing, unemployment, and falling/stagnant wage growth. Worth your time to peruse his site. He often provides several updates throughout the day as new data is released.

http://confoundedinterest.wordpress.com/

Thu, 09/18/2014 - 09:18 | 5229586 AdvancingTime
AdvancingTime's picture

 I have owned an apartment complex in the Midwest for many years and we are currently experiencing the largest number of vacancies we have ever had. Many houses in the area are empty or under leased. In 2005 and 2006 prior to the housing collapse many people were looking at second homes, for investments or as a vacation getaway, today not only have they shed the extra home many have doubled up with family or friends reducing the need for housing. We are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. We have a shortage of "qualified" buyers and renters.

Thu, 09/18/2014 - 09:11 | 5229563 Spungo
Spungo's picture

What's up with early 2008? There was a gigantic surge of multi-unit permits.

Thu, 09/18/2014 - 09:16 | 5229578 AdvancingTime
AdvancingTime's picture

Big drop in interest rates and money pouring out into this market.

Thu, 09/18/2014 - 09:14 | 5229570 AdvancingTime
AdvancingTime's picture

When it comes to real estate low interest rates at some point becomes a double edge sword, that effects both the value by making it easier to purchase thus driving up prices, and at the same time allowing more building to take place and increasing the supply. Often we reach or exceed demand, this eventually has a dampening effect on rents and people stop buying it as an "investment".

Prices must rise and real estate appreciate more then the natural depreciation from the wear and tear from age or the main driver for owning it vanishes. Oversupply is the bane of real estate and crushes the value of this hard and expensive to maintain commodity. Currently we are in uncharted waters, more on this subject in the article below.

http://brucewilds.blogspot.com/2013/12/super-low-interest-rates-disservi...

Thu, 09/18/2014 - 09:55 | 5229748 nscholten
nscholten's picture

Your obviously not in Austin or Seattle.  

Thu, 09/18/2014 - 21:00 | 5232320 AdvancingTime
AdvancingTime's picture

That's right, the whole world does not live in Austin or Seattle. Bottom-line is much of the country remains mired in a recession and for us what we see around us is a giant fucking bubble that will end badly. the only good thing is areas like mine will not have as far to fall!

Thu, 09/18/2014 - 09:17 | 5229585 Mi Naem
Mi Naem's picture

"Housing Starts, Permits Tumble Driven By Collapse In Multi-Family Units"

This can't be - just yesterday the home builders were all getting high together. 

What'd they do, run out - already?!?

Thu, 09/18/2014 - 10:30 | 5229864 Dr Strangemember
Dr Strangemember's picture

Bong hits cloud the mind...  confusion (and hunger) ensues.

Thu, 09/18/2014 - 09:32 | 5229650 nscholten
nscholten's picture

Chart doesn't look like anything yet.  Its perfectly normal and rational to decrease future building of anything when there has been a recent surge in construction.  Its no secret that there has been a search in multi family the past 4 years.  Seattle seems to be entirely under construction.  The metro city looks to double in size over the next 5 years.  Phoenix has significant amount of multi family in the core area with significant homoe construction at the periphery.

This will cycle down as it always does.  However, population growth in certian cities is certainly on the up swing in significant way.  They need a place to live.

Thu, 09/18/2014 - 09:38 | 5229676 gatorengineer
gatorengineer's picture

Planning for Ebola vacancies?

Thu, 09/18/2014 - 09:40 | 5229690 Temerity Trader
Temerity Trader's picture

Bears, it doesn't matter. Bad news equals lower rates and even more QE. Bulls love to see the "bad' news, it is win-win for them. The worse the news, the more stocks soar on hope for even more Fed intervention. You cannot fight the Fed. Everything they have done so far to push the markets ever higher has worked. They are patting themselves on the back and laughing at the bearish hedge fund managers. This is the New Normal; it is here forever. There are no limits on credit expansion. The Nikkei went to almost 40,000.

Thu, 09/18/2014 - 09:54 | 5229745 Mi Naem
Mi Naem's picture

"The Nikkei went to almost 40,000."...

...until it didn't.  Now they struggle to maintain 15 - 16,000. 

Every reasonable observer has been impressed with the diabolical success of our financial overlords.  However, though the Dow/S&P may well go a good bit higher, everybody knows that the end of the party is nigh.  That is why the snooping, militarization of police, control of media, etc. becomes more public and accelerates in momentum. 

 

Thu, 09/18/2014 - 09:52 | 5229734 NEOSERF
NEOSERF's picture

Apparently answering a phone survey optimistically (with the silly  hope that a better survey result will create more demand) is not reinforced by heading down to the Town Hall to apply for permits...

Thu, 09/18/2014 - 10:47 | 5229942 miker
miker's picture

The massive apartment boom around the country was funded by the Fed through MBS purchases from Fannie.  All the developers jumped on this as it was the only game in town.  I live in Charlotte; apartments are being put up everywhere.  There is no way they will be financially viable when the next down turn hits (very soon).  The reason the apartment starts dropped is because the QE spigot is being turned off.  Last spring, when it was clear the Fed was going to end QE this year, the surge in apt announcements was mind-boggling.  Those late comers had to move quickly or lose out.  One old apartment complext (but serviceable) was bought outright and all tennants sent out within 30 days.  Many were poorer or in poor health but they didn't care.  The new complex is being build as we speak.  Talk about being in a hurry.

When the bottom drops out of the economy, all of these apartements will be owned by the Fed.  They will transfer them to HUD and will become free or almost free housing for everyone that can't afford anythinig else.  I do believe our governmetn leaders expressly cooked this up so at least the housing would have a later use when things go bust.  

Thu, 09/18/2014 - 13:17 | 5230643 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Bang on, Miker. The USA construction industry saw more profit in multi-family housing starts, and that's why they moved in en masse.

The banks needed to inflate the $1.4 quadrillion dollar dark pool derivatives universe with a new scheme of sub-prime mortgages, and multi-family units can be sold much quicker than single family homes that are a glut in the market. Student loans sub-prime borrowing has

flat-lined causing colleges/universities to close down programmes.

Sub-prime car loans are over 1/3 in default, and the banks have completely run out of Muppets to rip-off. Hedge funds are fueling the multi-family housing starts simply to push on the string of more sub-prime borrowing that the Investment Banksters are attempting to generate so they can make mo-money from the Gubberment. Fannie & Freddie are going to implode the entire USA economy when they finally go bust. This next crash will wipe out the entire contruction industry in North America within months.

Thu, 09/18/2014 - 10:46 | 5229943 miker
miker's picture

The massive apartment boom around the country was funded by the Fed through MBS purchases from Fannie.  All the developers jumped on this as it was the only game in town.  I live in Charlotte; apartments are being put up everywhere.  There is no way they will be financially viable when the next down turn hits (very soon).  The reason the apartment starts dropped is because the QE spigot is being turned off.  Last spring, when it was clear the Fed was going to end QE this year, the surge in apt announcements was mind-boggling.  Those late comers had to move quickly or lose out.  One old apartment complext (but serviceable) was bought outright and all tennants sent out within 30 days.  Many were poorer or in poor health but they didn't care.  The new complex is being build as we speak.  Talk about being in a hurry.

When the bottom drops out of the economy, all of these apartements will be owned by the Fed.  They will transfer them to HUD and will become free or almost free housing for everyone that can't afford anythinig else.  I do believe our governmetn leaders expressly cooked this up so at least the housing would have a later use when things go bust.  

Thu, 09/18/2014 - 11:43 | 5230263 SRVDisciple
SRVDisciple's picture

Meanwhile, building permits for Internment Camps and Field Hospitals is at an all time high!

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